New Home Sales Jump In November

This year will probably go down as the worst ever for sales of new homes. But at least 2011 is ending on an up note.

The Commerce Department reports sales of new homes in the U.S. jumped 1.6 percent in November, at an annual rate of 315,000 units. That would be worse than the 323,000 units sold last year - until now the worst year on record.

While the economy needs new home construction for growth, a devastated housing market doesn't necessarily need more homes coming onto the market. Industry analysts point out the lack of home building activity over the last three years will actually help the market eventually recover, since it reduces the inventory of available homes. Still, this latest report gave many economists a reason to be encouraged.

"The November pace was just about at its highest level this year," said Joel Naroff, of Naroff Economic Advisors, in Holland, Pa. "The October number was revised upward and if that happens with November, we could see the rate break that high.

Still, the level of sales activity is extremely low - about one-quarter the pace hit at the peak of the boom. One possible reason for that is builders simply aren't turning out new houses like they once did.

Few new homes for sale

"The number of homes for sale hit the lowest level in the forty nine year history of the data," Naroff said.

But more houses appear to be under construction. Earlier this week the government reported housing starts surged by 9.3 percent. A very large number of those, however, were apartment buildings. With it more difficult to buy a home, rents are rapidly climbing, making multi-family housing a more attractive investment.

Also this week the National Association of Realtors reported sales of existing homes rose four percent in November, leading Naroff and others to believe the housing market - without the benefit of stimulus and in the face of very stringent mortgage lending standards - is beginning to heal.